If you’re overwhelmed at the prospect of hiring new employees, you might be considering using a staffing agency for support. Staffing agencies provide recruitment and employment services to companies of all kinds.
Working with a staffing agency can help you save time and score great talent—but not all agencies are created equal. Below, we’re sharing all the pros and cons of staffing agencies, so you can make the right decision for your business.
Why staffing agencies are helpful: 6 benefits of working with a staffing agency
Consider these key benefits:
1. You get expert recruiting support
Great staffing agencies are experts at finding and vetting job candidates. They know where to reach job seekers, which job boards have the highest return on good job applications, and how to get creative to tap into the best talent.
They’re also skilled at assessing whether or not a job candidate’s particular skill set and work experience will align with your business needs. Plus, they know which kinds of questions to ask during job interviews and how to negotiate employment terms and pay.
2. You can focus on other work
Depending on your business’s stage, you might not have the time or energy to devote to hiring, no matter how familiar you are with the process.
Outsourcing hiring to a staffing agency doesn’t just free you up to focus on your day-to-day work—it also gives you more brainpower to put toward big business initiatives, like creating a growth plan or improving employee engagement.
3. You get access to a larger candidate pool
Connecting with qualified workers is a struggle for most small business owners. Even if you find job candidates with the experience and background you’re looking for, their shift preferences and start availability may not line up with your business needs.
That’s where a staffing agency comes in handy. They maintain relationships with a large pool of job candidates with diverse backgrounds and work experience. More options mean a greater chance of finding the people with the right qualifications for your business, whether they’re temporary workers or long-term employees.
4. The hiring process is faster
The entire hiring process—from creating an accurate job description to presenting an employment contract—can take many months if you do it on your own. With a staffing agency on your side, the process might only take a few weeks (or sometimes days for temporary employees).
Finding quick work for seasonal jobs and temporary positions means your business doesn’t have to slow operations down just to get by. Filling long-term roles on a faster timeline makes it easier to kick off growth initiatives or accept new client projects.
5. There’s less hiring risk
Using a staffing agency can help minimize your compliance risk as an employer, especially if you’re hiring for the first time. As an employer, you have to abide by a slew of federal and state employment laws, which apply to the daily work of overseeing an employee (think: wage and overtime laws) as well as the hiring process.
In addition to complying with Equal Opportunity and anti-discrimination laws, staffing agencies make sure they’re following your state’s regulations around pay transparency in job descriptions, background checks, and salary history questions.
Check out Gusto’s state-by-state guide to pay equity laws.
6. You have more flexibility
Using a staffing agency gives you the flexibility to supplement your workforce without committing to a permanent hire. You can take advantage of temporary employees for short-term assignments, special projects, and seasonal work while keeping your overhead costs low.
You can even use temp-to-hire roles to test new positions in your workplace and see if you want to make long-term changes.
4 drawbacks of working with a staffing agency
Staffing agencies aren’t a perfect solution to hiring problems. Before you reach out to an agency, consider these drawbacks:
1. You don’t get to interact with job candidates before they’re hired
When you use a staffing agency, you’re ceding control to them, and you generally don’t participate in candidate interviews or phone calls. This is helpful from a workload standpoint, but it also means you don’t get the chance to establish a connection with your new employee before they start work.
If you’re hiring for long-term roles, that lack of connection can create a potential workplace culture gap since your employee’s first impression of your business is your staffing agency, not you.
Plus, if the agency doesn’t take the time to understand your workplace culture and business ethos, they might not present your business or explain job details to candidates in the correct way. This can lead to mismatched employees, which can then lead to high turnover in your business.
2. You have to budget for additional hiring costs
Hiring a staffing agency can be a worthwhile investment in your business goals—but it can also stretch your hiring budget. It’s crucial to determine if the benefits outweigh the costs.
Staffing agencies charge you a percentage of your hired employee’s wages. For direct hires, the markup is usually a one-time fee of 10-25% of the hire’s annual salary. For temporary workers, you’ll pay a markup anywhere between 20% to 80% of their hourly rate.
Depending on the agency you use, you may also have to pay fees for extra services and contract buyouts.
3. You need to maintain regular communication with your agency for success
Hiring a staffing agency won’t work if you opt into a subscriber model or only communicate via email. To build a successful partnership with your staffing agency, it’s critical to maintain a clear line of communication. In addition to aligning expectations from the start, it’s also helpful to establish a regular check-in frequency and discuss how you’ll handle tricky situations or setbacks together.
Keep in mind that while it’s important to be specific about your business needs and employee qualifications, you also shouldn’t have to teach the staffing agency what your employees do or what certain skills mean. A good agency should already have a deep understanding of the roles you’re hiring for.
If you hire a staffing agency on a retainer or ongoing basis, make sure you also talk about how and when to give feedback on the hiring process and hires.
4. Many staffing agencies have poor reputations
Like companies of every kind, some staffing agencies have less than stellar reputations. Poor reputations can stem from a number of factors, including treating job candidates and temporary employees like numbers instead of valuable workers, having a low placement success rate, not having in-depth market knowledge of the sectors they claim to serve, and prioritizing profits over building genuine partnerships with the companies they serve.
How to decide if a staffing agency is right for your business
Take these factors into account before you hire a staffing agency:
Your business goals
How will a new hire support your larger business goals? Are you looking for long-term employees or seasonal help? Do you need someone with specialized experience or someone who has transferable skills?
If you think you’ll have a tough time finding the right candidate, a staffing agency could help. But if you already have a lot of stellar job applications and interest, you might feel confident pursuing prospective employees on your own.
Your hiring budget
What’s your hiring budget? Start by calculating how much a new employee will cost to hire on your own, then estimate an agency’s bill rate. Keep in mind that a complete hiring budget doesn’t just include payroll and taxes—it also includes recruiting expenses, job board subscriptions, hiring software, and lost productivity from the hiring process.
Depending on the agency you use and the role you’re hiring for, the cost of an agency could give a great return on investment—or prove to be not worth it.
Your hiring timeline
When do you need new hires? If you’re planning for a long-term role and aren’t in a rush, you can probably afford to take your time with the hiring process. But if you need support as soon as possible—or want to be ready in case customer demand spikes—getting help from an agency could help prevent issues and keep operations running smoothly.
Your bandwidth
How much energy and time can you devote to hiring right now? If you want to be involved in every step of the process, hiring on your own might be the right move. But if you and your team can’t spare the time, a staffing agency can fill in the gaps.
The agency
Of course, it’s also crucial to vet the agencies you’re considering. Make sure they have a proven track record of working with businesses like yours, treating job candidates well, and placing qualified employees. In addition to reviewing their online reviews, ask the agency for data on their average placement rate and how often they work with companies in your niche.
Alternatives to a staffing agency
Staffing agencies are just one hiring option among many. Here are some alternatives:
- DIY hiring: Enlist your hiring manager or a couple of senior employees for help, and do it yourself. Embrace online resources like hiring guides and small business reports for extra intel.
- Use small business software: Small business software platforms like Gusto can automate tedious tasks like posting job ads and reviewing applications. With Gusto Recruiting, you can create a custom company job board, manage all your applicants in one place, and even add them straight to your Gusto payroll once they’re hired.
- Reach out to your network: Post in local community groups, ask your employees for job referrals or reach out to a hiring consultant.
Hire with ease
If you need help hiring, we’ve got you covered. Check out our complete guide to hiring for your small business or explore our state resources page to find out your state’s unique hiring requirements.
